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September 21, 2017
On September 22, the U.S. International Trade Commission (ITC) will vote on a petition from two American solar panel manufacturers seeking import relief under the rarely invoked Section 201 of the Trade Act of 1974. This vote will either end months of conflict between the petitioning manufacturers and downstream industries (such as installation and project development) represented by the Solar Energy Industries Association (SEIA) - or else raise the stakes. If the ITC affirms the petition, it will begin crafting a policy recommendation to the President that could be instituted before the end of the year.
The co-petitioners are Suniva and SolarWorld, manufacturers of crystalline silicon (c-Si) photovoltaic (PV) solar cells and modules in the United States, who claim the abundant presence of inexpensive imports has caused their product sales to suffer. Suniva filed for bankruptcy in April 2017 and SolarWorld’s parent company in Germany is insolvent. SolarWorld was successful in previous petitions for import relief between 2012 and 2014, which resulted in tariffs on Chinese and Taiwanese imports, but these measures were not enough to save the company. Now SolarWorld and Suniva are seeking a global tariff and floor price for all imported CSPV cells and modules, despite solar analysts’ predictions that these measures would be disastrous for the American solar industry. SEIA has united downstream industries and solar advocates in a campaign that supports rejecting the petition.
The petitioners have proposed a tariff of $0.40 per watt and a floor price of $0.78 per watt for all imported c-Si photovoltaic cells, whether sold separately or assembled into panels. PV solar accounts for a large majority of installed solar capacity globally. The combined tariff and floor price would double the cost of solar panels in the United States, disrupting both the residential and utility solar markets. Analysts estimate that cumulative demand for solar over the next five years would contract 50 percent in response to this policy.
Seventy-five percent of solar expansion in the United States in 2016 was in the utility sector. The boom in utility-scale solar development is due largely to the falling price of panels. Lower input costs have allowed solar to achieve grid parity in new markets, matching the costs of other available energy sources such as wind and natural gas. The tariff would reverse grid parity in many regions, forcing solar out of these highly cost-competitive utility markets. Although some growth in utility-scale solar is secured by policy mandates, most is not. Only 23 percent of projected growth in the utility sector over the next four years is tied to policy support. Solar has so far achieved grid parity in 31 state energy markets, but in some cases, just barely. States that have achieved grid parity recently or by small margins, such as Florida and Utah, may drop future plans for utility solar. States with strong solar markets are vulnerable for other reasons. California, the most robust state solar market, would experience a minimal downturn in relative terms, but the absolute losses in foregone installations would be significant given the high-volume of the market.
The solar industry has been a source of tremendous job creation in recent years. Last year, one out of every 50 jobs created in the United States was in the solar industry. The industry currently provides 260,000 jobs - more than the domestic coal industry and about equal to natural gas. Analysts predict that 88,000 solar jobs would rapidly disappear if the proposed tariff is implemented. Many of these are blue collar jobs in solar installation.
Solar manufacturing employs 38,000 Americans and the tariff would threaten these jobs too. Few American manufacturers still make the solar cells and panels that the tariff protects. American manufacturing has shifted to the production of complementary goods, like mounting systems. Over 20 American manufacturers of mounting equipment representing 5,700 workers wrote a letter to the ITC voicing their opposition to the proposed tariff.
Given the potential for widespread economic impacts, federal policymakers have joined in opposition to the tariff. A bipartisan group of 16 senators, led by Senators Thom Tillis (R-NC) and Martin Heinrich (D-NM), penned a letter urging the ITC to consider the economic consequences of the tariff in their decision-making. If the tariff proposal moves forward, political backlash is expected to intensify.
The petition has received global political opposition as well. Representatives from countries that manufacture PV products and anticipate negative impacts from the tariff argued for exemptions at the August 2017 petition hearing. If the tariff is implemented, at least one country is expected to appeal the measure through the World Trade Organization (WTO). The last Section 201 relief measure passed was a steel tariff by President George W. Bush. The tariff was challenged by the WTO and ultimately withdrawn.
Just a day before the Commission votes, speculation over the outcome remains mixed. This uncertainty reflects a lack of consensus on how Section 201 should be interpreted. The legal standards written in Section 201 require petitioners to prove that imports are the “substantial cause” of “serious injury” to their industry. The ITC’s decision will depend on how much weight they give to evidence that a tariff will hurt downstream industries.
Statistically, the tariff proposal is likely to fail. Only 19 of 73 Section 201 petitions filed have ever resulted in relief implementation and a floor price is unprecedented. Furthermore, Suniva and SolarWorld failed to file an adjustment plan, which would explain how they would utilize relief measures to their benefit. Adjustment plans are not required, but they are the norm. All but one petitioner in the last 30 years submitted a plan. Without any adjustment plan, it’s unclear if the tariffs are enough to save the petitioners from their significant financial problems.
If the ITC affirms the petition, the President’s response is also hard to predict. The Trump Administration will have to choose between two of its core values: protectionist economics and blue collar jobs.
The solar industry hopes the tariff never makes it this far. If the Commission rejects the petition, the solar industry, its investors, policymakers, and renewable energy advocates will all be able to let out a sigh of relief.
Author: Beatrix Scolari
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